Baseball Salary Arbitration

Thirty-four players and teams exchanged numbers this year in salary arbitration if you include Santiago Casilla and the San Francisco Giants, who announced a settlement on the day of the exchange of figures. Apparently, Casilla and the Giants had an agreement in place two days earlier, but needed to finalize the deal. They seem to have exchanged numbers just to be sure that they preserved their rights until everything was final.

According to my research to date, 21 of the 34 have reached an agreement leaving 13 cases still active. Of the 21, five are multiyear deals; five settled above the midpoint; three settled at the midpoint; and eight settled below the midpoint. The five multiyear deals are Billy Butler and the Royals, Johnny Cueto and the Reds, R. A. Dickey and the Mets, Jason Hammel and the Rockies, and Wandy Rodriguez and the Astros. Settlements above the midpoint include Craig Breslow and the A’s, Jason Frasor and the Blue Jays, Miguel Montero and the Diamondbacks, Mike Napoli and the Rangers, and Darren O’Day and the Rangers. The three midpoint settlements are Francisco Liriano and Kevin Slowey with the Twins and Andres Torres and the Giants. The settlements that are below the midpoint include Casilla, Frank Francisco and the Rangers, Hong-Chih Kuo and the Dodgers, Kameron Loe and the Brewers, Javier Lopez and the Giants, Angel Pagan and the Mets, Ian Stewart and the Rockies, and Edison Volquez and the Reds.

Napoli's situation is interesting because he was traded twice after exchanging figures with the Los Angeles Angels of Anaheim. The Angels traded Napoli to the Blue Jays who packaged him in a deal to the Rangers. That deal is part of what is triggering Michael Young to ask out of Texas.

Jon Heyman of Sports Illustrated has tweeted that Ross Ohlendorf and the Pittsburgh Pirates have the first hearing of 2011 today. I will be posting something later about Ohlendorf, who is a Super Two.

Missing seats, Super Bowl tickets, and contract damages

The NFL and the people who run Cowboys Stadium built a lot of temporary seating for the Super Bowl (apparently to set an attendance record by exceeding 105,000), but approximately 1250 seats could not be installed. The league found alternative seating for 850 of those fans, but not for the remaining 400, who were turned away with a refund of triple their ticket's face value--$2400.

Here is a contract remedy question: Are these fans entitled to more and could they successfully sue the NFL for it? Suppose Fan A spent more than $1600 on travel, hotel, etc. He likely spent that money only because he had a ticket to the game and expected to be able to attend, and the NFL knew he will and must make those expenditures to attend the game. So are those recoverable reliance damages? Suppose Fan B paid more than the $ 800 face value because he had to buy the ticket through a broker/scalper. The league controls who purchases tickets and must be aware that many publicly available seats are sold to people who are going to resell them at at least a small profit. I suppose a court might deny recovery there because the beyond-cost resale is against public policy. Still, could Fan B make that case?

Contracts/Remedies people, help me out.

Update: The league is now offering fans one of two packages: 1) $ 2400 (triple face value) plus tickets to next years' Super Bowl, including air fare and accommodations or 2) Tickets, including air fare and accommodations, to any future Super Bowl. Apparently fans balked at the initial offer made Sunday oif triple face value because most spent more than that on tickets, travel, and accommodations.

So a different remedy question: Did the NFL actually go beyond what it would have been on the hook for in litigation? It seems clear Fan A could have sued for all reliance damages (ticket cost, accommodations, etc.). Could Fan A also have gotten tickets to a future Super Bowl, arguing that he was denied the unique experience of attending the game?

Further Update:  The lawsuit (mentioned in the Comments) is a class action in California on behalf of more than 1000 fans. But this must include some of the fans who were given new seats. What more could the fans possibly get, especially the fans who were given alternate seating? They have not been damaged. And, just to get procedural: Is there jurisdiction in California? Is there a good forum non conveniens argument? And should California law (which allows for treble damages) apply? This one could get interesting.

Revisiting Electronic Arts' Exclusive Contract with the NFL and NFLPA

Back in 2004, I wrote about Electronic Arts snagging an exclusive licensing contract with the NFL and NFLPA to develop, publish, and distribute football video games featuring NFL players and teams. The 5-year, $400 million contract--the exclusivity of which resembles the exclusive NFL-Reebok contract that precipitated American Needle v. NFL--meant the end of other third-party publishers making NFL video games. Most notably, it meant that Sega's popular/arguably better and substantially cheaper NFL 2K series would be discontinued while Electronic Arts' John Madden Football would become the only NFL game in town.

Since then, the exclusive contract has been extended to 2012 and John Madden Football has been published each year, with annual updates to player rosters and, some would argue, only modest enhancements to game play. Nonetheless, each year's iteration of Madden Football tends to attract reasonably favorable reviews and sell quite well.

I wrote about this topic and related litigation in my Yale Law Journal article "American Needle. v. NFL: An Opportunity to Reshape Sports Law":

Although Electronic Arts' NFL games have sold well since 2004, they have attracted criticism for lacking innovation. Prices for Madden NFL games have also risen in the absence of competition from other NFL games. Those and other consequences underscore a central concern of section 1: an absence of competition will lead to an inferior market. The exclusive Madden contract is also the subject of Pecover v. Electronic Arts, a class action lawsuit recently brought by disenchanted video game players. The suit contains a number of claims, including those based on the Sherman Act. While neither the NFL nor the NFLPA is a party to the litigation, their exclusive contract with Electronic Arts could eventually face a section 1 challenge similar to the one confronted by the NFL in American Needle. Plaintiffs in such a claim would likely assert that interactive football video game software is a sufficiently discrete product market - a proposition supported by the U.S. District Court for the Northern District of California in Pecover. With some level of persuasion in light of the aforementioned data on prices and commentary on innovation, the plaintiffs could also maintain that Electronic Arts's exclusive contract for NFL video games produces more anticompetitive injury than procompetitive benefit.

In an interview with RipTen, Marc Eldeman also discusses these issues. Also, Pecover v. Electronic Arts remains in litigation, with its lead attorney confident that the plaintiffs will prevail.

Fast forward to 2011, IGN's Hilary Goldstein takes a critical view of the exclusive NFL contract with Electronic Arts. Here's an excerpt of his article, which hits at two concerns antitrust law has for exclusive contracts: higher prices and diminished innovation.

I have little doubt the Madden series would be considerably better if [Electronic Arts] developer Tiburon had a competitor threatening it each year . . . Does Madden NFL 11 play better than Madden NFL 2005? Yes. There's no question that, over time, the gameplay has seen improvements thanks to better animations and smarter AI. But because there is no one else to stand up against it, Tiburon can schedule its innovations at its leisure. . . .

I don't expect Tiburon to start taking big chances and making more exciting and more substantial improvements. Why would they? And that's what sets the Madden series apart from the majority of other games. No one can rightly compete, because the NFL license is football and EA holds onto it tightly.

Sure, Microsoft owns the Halo license, but anyone has a right to make a first-person shooter and it can legitimately stand on its own. You can't make a football game without the NFL teams and players. It's an automatic fail.

To read the rest of Goldstein's article, click here.

New Sports Illustrated Column: Will Mets Owner Fred Wilpon Settle Complaint from Madoff Victims?

I have a new SI column on the complaint filed by victims of Bernie Madoff against Mets owner Fred Wilpon, and what it means for the future of the Mets. The complaint was unsealed today. Here is an excerpt from the column:

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A settlement might also benefit Wilpon from the standpoint of his coveted position as an owner of a major league franchise. For one, his team would likely be handicapped by a drawn-out litigation. There would be resulting uncertainties as to how much the team could spend, especially on players. For instance, how would the team approach contract discussions with prized shortstop Jose Reyes, who is scheduled to become a free agent after the 2011 season, if the team's owner might be forced to pay hundreds of millions of dollars in the Madoff fallout? Or how would the Mets approach trade offers for ace Johan Santana, who is due a guaranteed $72 million over the next three seasons? And would the team be forced to change its draft strategy to one that involves drafting a larger percentage of amateur players who would be cheaper to sign over more talented, but expensive prospects?

A settlement might also prove beneficial to Wilpon as a big league owner because of Picard's assertion that $90 million from Madoff's fund was used to finance the Mets. If true, such an assertion could cause substantial problems for Wilpon in his relationship with other big league owners and with the commissioner's office. It would mean that Madoff's victims -- many of whom lost their life savings to Madoff's Ponzi scheme -- effectively paid the salaries of million-dollar Mets players.

Empowered with his "best interests of the game" authority, and also with language from the franchise agreement Wilpon signed with Major League Baseball when he purchased the Mets, Selig could potentially discipline Wilpon and encourage him to leave the fraternity of big league owners -- a move that could be facilitated if other big league owners shared the view that Wilpon should not be among them. . . .

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To read the rest, click here.

NBA Legend Oscar Robertson Joins Ed O'Bannon Lawsuit against NCAA

Ed O'Bannon's class action lawsuit against the NCAA, which centers on the NCAA's use and licensing of former college players' images and other identifying characteristics, received a boost last week, when Hall of Fame guard Oscar Robertson - the only player in NBA history to average a triple-double (30.8 ppg, 12.5 rpg, 11.4 apg in 1961-62) -- joined O'Bannon as a plaintiff.

As Libby Sander's discusses in her Chronicles of Higher Education article, the 72-year-old Robertson, who played at the University of Cincinnati until 1960, objects to the NCAA and his alma mater still licensing his image for their financial gain, without his permission, after all these years.

Just check out the Amazon page for his Donruss "American Legends" basketball card, depicting Robertson's days as a college player. Robertson receives no compensation for the cards (unlike his NBA cards).

Dan Wetzel of Yahoo! Sports has more on the Robertson addition and other new co-plaintiffs:

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“The arrogance of the NCAA to say, ‘we have the right to do this,’ … is what troubles me the most,” Robertson told Yahoo! Sports on Wednesday. “The University of Cincinnati gets a fee each time my picture is used on a card. I don’t. When I played there, there was nothing like this ever agreed to.”

Robertson put his considerable reputation on the line Wednesday and joined a 2009 class action suit against the NCAA, first championed by former UCLA Bruin star Ed O’Bannon, as a name plaintiff.

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Joining Robertson in the additional complaint is former Connecticut player Tate George, whose buzzer-beating shot over Clemson in the 1990 NCAA tournament has been resold in DVDs and featured in advertising campaigns for Vitamin Water, McDonald’s, Burger King, Buick, Chrysler, and Cadillac. It was recently used in an online advertising campaign to sell Egg McMuffins.

Also now on board is former Ohio State football player Ray Ellis, who starred in the 1980 Rose Bowl. A number of games he participated in are being sold on commemorative DVDs or rebroadcast on the Big Ten Network.

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To read the current complaint, click here. To read an SI.com column I wrote on the case, click here.

Public Forum: MMAdness - Issues Surrounding the Legalization of Mixed Martial Arts in NY : Rescheduled

Wednesday, February 09, 2011

Location: 14 Vesey Street

Time: 6:00pm

Speakers:

* Joseph M. DeGuardia, Esq., Owner of Star Boxing, a boxing promotional company, and President of the Boxing Promoters Association;

* Michael DiMaggio, Esq., Associate, Collins, McDonald & Gann, P.C., dietary supplements and sports drug defense;

* Kurt Emhoff, Esq., Attorney, Kasowitz, Benson, Torres & Friedman and licensed boxing manager;

* Paul Stuart Haberman, Esq., licensed boxing manager and Chair, Entertainment, Media, Intellectual Property and Sports Law Committee's (EMIPS) Sports Law Subcommittee of the New York County Lawyers Association; and

* David N. Weinraub, Managing Partner, Brown & Weinraub, PLLC, New York UFC Lobbyist.

Panelists will discuss the legal and regulatory issues relating to the legalization of mixed martial arts in New York, as well as its potential economic impact if it were legalized.

Sponsor: EMIPS Committee

FREE/RSVP: dlamb@nycla.org

New Sports Illustrated Column on Lawsuits filed against New York Mets Owner

I have a new SI.com column on two significant lawsuits filed against Mets owner Fred Wilpon and others connected to the team. Here are some excerpts from the column:

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The lawsuits center on Wilpon and his companies' investments with imprisoned Ponzi scheme artist Bernard Madoff and whether Wilpon and his associates knew, or should have known, of Madoff's fraudulent actions. If successful, the lawsuits could require Wilpon and other defendants to pay hundreds of millions in damages. Payment of those damages could threaten Wilpon's ability to own the Mets or at least to sustain a high team payroll. (The Mets had the fifth-highest payroll in 2010 at $133 million.)

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Goldweber v. Sterling Equities is a class action lawsuit filed last July in the U.S. District Court for the Southern District of New York. The named plaintiff, Elyse Goldweber, is the widow of a former employee of Sterling Securities, a real estate investment firm that owns the New York Mets, among other businesses. Sterling Securities maintained a 401(k) retirement plan worth about $17 million, 92 percent of which was invested with Madoff, whose fraudulent actions wiped out most of the plan.

* * *

Goldweber's primary claim boils down to a "hear no evil, see no evil" charge: Wilpon and his associates should have questioned Madoff's investment strategy, especially given the numerous commentaries that had raised questions about Madoff's almost unbelievable returns. Had Wilpon inquired seriously into Madoff's remarkable track record, he would have developed suspicions that Madoff was not investing, but rather ripping off investors. . . .

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[Picard v. Katz & Wilpon} is known as a "clawback" lawsuit: If an investor "earned" any profits in a fraudulent enterprise up to six years prior to discovery of the fraud, those profits themselves can be deemed fraudulent. The underlying logic is that those profits were generated from fabricated numbers and from money that was stolen from other investors, many of whom are left with nothing in the Ponzi scheme. If deemed fraudulent, profits are then disgorged from the investor and re-distributed to victims of the fraud. Even an investor's principal investment can be "clawed back" if it was recovered in bad faith, such as recovering the principal within 90 days of a hedge fund filing bankruptcy (in the case of Madoff's fund, the bankruptcy filing date was Dec. 11, 2008, meaning that Katz and Wilpon needed to have recovered their principal no later than Sept. 11, 2008). The potential damages in a successful clawback lawsuit against Wilpon could go into the hundreds of millions.

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While Major League Baseball has not weighed in on Wilpon's woes, it is in the best interest of the league and Wilpon's fellow owners that lawsuits do not become sources of league-wide embarrassment. To the extent that commissioner Bud Selig and the owners can encourage Wilpon to reach private settlements, they will likely do so.

The Major League Baseball Players' Association also has a stake in the matter. Considering that Wilpon pays the Mets' salaries, his financial wherewithal, and that of any other Mets' owners, are matters of great significance for Mets players. While the league could provide the Mets with financial assistance if need be (or go a step further and take over control of the franchise, as occurred with the Texas Rangers last season), a financially-capable Mets ownership would prove the best outcome for all considered.

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To read the rest of the column, click here. On Thursday, at 10:35 A.M. Eastern, I'll be on Sirius XM MLB Network Radio (XM Channel 175) to discuss the column with former Red Sox manager Kevin Kennedy and former Mets GM Jim Duquette. Hope you can tune in.